“Promote” in Bayh-Dole, 3

We are working through the Public Citizen v NIH case. Public Citizen sought to make the NIH disclose key elements of its exclusive licensing practice, and NIH refused. The Court agreed with the NIH–that in the balance between public interest and private interests–including NIH’s private or at least secret interests–the private interest should prevail. There should be no public oversight of federal agency dealings in patent monopolies.

Central to the Court’s, um, reasoning involves a second-hand interpretation of Bayh-Dole and the Federal Technology Transfer Act, spun through the NIH’s representation of these laws. The NIH argued that any public revelation of the royalty rate or income received would harm its licensing program. Federal technology transfer law, so it would appear, can operate only when it operates in secret.

Bayh-Dole shows up in Public Citizen in a discussion of whether revealing royalty rates would “impair” the NIH’s ability to “effectively implement” its licensing program.

Essentially, Defendant [NIH] contends that its ability to fulfill its statutory mandate under the Bayh-Dole Act would be seriously deterred by the release of the royalty information to Plaintiff [Public Citizen].

The Court cites the Bayh-Dole Act’s statement of policy and objective:

In this case, under the Bayh-Dole Act, Congress has directed federal agencies to use the patent system to promote inventions arising from federally supported research.

We might feel some relief that the Court identifies a “statutory mandate” for Bayh-Dole and finds that mandate in 35 USC 200. We might feel even better if the Court had bothered to cite that mandate accurately. But no, sucks.

The Court drops “the utilization of” and makes Bayh-Dole’s objective to be one of “promoting inventions,” as if the mandate is for the NIH to market inventions rather than to see that inventions are used more fully than they would otherwise. There’s no point to the law if the law’s purpose is not to alter what would happen otherwise, yes? One is to use the patent system because doing so promotes public welfare, and not doing so does not so much.

To support its paraphrase of Bayh-Dole’s mandate, the Court then quotes a portion of 35 USC 200–the parts about utilization, maximum participation of small businesses, and collaboration between companies and nonprofits (and which does not appear to have anything to do with collaboration between companies and federal agencies–something more properly the subject matter of Stevenson-Wydler, not Bayh-Dole. The Court skips the parts in 35 USC 200 about free competition and American manufacturing–both of which are relevant to federal agency licensing of inventions and which show up, in a tangle of awfulness, in the federal agency side implementing regulations at 37 CFR 404.

The effect of the Court’s reasoning here is to make it appear that “promote inventions” is the meaning of “promote the utilization of inventions” without actually taking the risk of trying to make the claim that Congress wanted federal agencies and nonprofits to use the patent system to market inventions, not actually to see that the inventions get used. The difference is huge. Marketing inventions–shopping them around as patented assets–is relatively easy. Seeing that inventions get used, and used in a manner better for the public than would happen otherwise, is rather more difficult–especially if a federal agency is determined to grant exclusive licenses and therefore deal monopolies to private companies.

The Court concludes, with a gratuitous “thus” to suggest the use of logical reasoning:

Thus, under the Bayh-Dole Act, the function of commercializing invention is left up to the private sector.

This conclusion makes sense if “promote” in Bayh-Dole means “advertise” so that the objective of Congress is that the federal government and nonprofit contractors are to use the patent system to advertise the availability of inventions for exclusive license, and beyond that it is up to “the private sector” to “commercialize” those inventions.

This is the vision of Bayh-Dole created by the court’s reasoning: all Bayh-Dole requires, according to the Court’s reading, is that the government (and nonprofit contractors) advertise inventions using patents. In doing so, the reasoning goes, the government promotes (advertises) the utilization of inventions. The pitch is–“this patent should encourage some one company to choose to utilize (use as the basis for a commercial product) this invention.” In other words, all Bayh-Dole does is to confirm the efforts of government agencies and nonprofit contractors to advertise inventions available for exclusive licensing.

Reducing “promote” to “advertise” leaves Bayh-Dole an empty law. “Technology transfer” becomes advertising, not the adoption of something new by a receiving party that previously did not have the capability of the transferred technology. The end result of such advertising is then just as AUTM and many university patent administrators depict it–a license, not actual use of an invention with benefits available to the public on reasonable terms. Not that the public gets something better than they would otherwise–a new capability, created more quickly and provided at a lower price than had there been no intervention prompted by Bayh-Dole.

The public interest apparatus supplied with Bayh-Dole, in this reading, is superfluous. It is up to “the private sector” to do anything with a patent right held by the government–the government has no further role, once it has issued a patent to itself and the re-issued that patent in the form of an exclusive license to, say, a pharmaceutical firm. There is no public oversight or accountability.

It is possible to argue that “advertise” is one sense of “promote”–that within a broader meaning of “to contribute to the growth or progress of,” advertising the availability of an invention by filing a patent application might be considered to contribute to the growth or progress of practice in the area of the invention. But even that is a questionable point–obtaining a patent gives its holder the right to exclude all others from practicing an invention (and to refrain from using the invention itself).

On the face of it, a patent works against utilization except as the patent holder decides to use. “Promote” in Bayh-Dole surely must be read to mean more than a narrow objective of advertising the availability of inventions for use by filing patent applications. How else to make sense of the constructions that follow in 35 USC 200? Consider “to promote free competition and enterprise”:

to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery

If “promote” here means “advertise,” then apparently the “free competition” is nothing more than encouraging multiple organizations to bid for an exclusive license–“free competition to obtain a license from the government” and not “free competition in the use of an invention arising in publicly funded work.” Otherwise, to use inventions to promote free competition would have to be read in the broader, common usage to mean “bring about greater or more widely practiced free competition with regard to the exploitation of this here invention.” The use of the invention by multiple organizations, competing as it were–or at least free to compete–is the idea of “free competition,” not advertising the potential for use, and not using the patent system as an excuse for a media announcement that a patent is available for licensing.

Of course, Bayh-Dole’s free competition policy applies only to nonprofits and small businesses, and not to the federal government, so the Court in Public Citizen does not have to worry free competition. But the Court does have to worry “promote”–and does so by equating “promote” with “advertise” or “market.” The NIH markets its inventions, and the private sector then decides whether or not to “commercialize” them: “under the Bayh-Dole Act, the function of commercializing invention [sic] is left up to the private sector.”

There’s no support in Bayh-Dole for the Court’s pronouncement. There’s nothing in Bayh-Dole that decrees commercialization–Bayh-Dole’s focus is on utilization and its threshold for intervention is practical application, the utilization of each invention with benefits available to the public on reasonable terms. Commercialization is one way to achieve utilization, but it is not the only way and not a way given any special standing by Bayh-Dole. The Court just makes up what Bayh-Dole does, asserts that, and then reasons from its fiction.

A Federal agency may grant an exclusive or partially exclusive license on a federally owned invention under section 207(a)(2) only if

(1) granting the license is a reasonable and necessary incentive to–

(A) call forth the investment capital and expenditures to bring the invention to practical application; or

(B) otherwise promote the invention’s utilization by the public.

Bayh-Dole goes on from there–the license must serve the public, the “applicant” commits to achieve practical application, the license won’t lessen competition or maintain a violation of antitrust laws. But there’s the point–Bayh-Dole is about invention use, not commercialization, and each federal agency must demonstrate that it has met Bayh-Dole’s conditions for granting each exclusive license.

The Court relies on NIH’s technology transfer director’s declaration that disclosing royalty rate information for a specific license “would seriously impair OTT in carrying out its public health responsibilities, since NIH would cease to be an attractive or viable licensor of patented technology.” NIH provides nothing to back up this assertion. Even statements from university technology transfer directors and from biomedical companies simply assert that they like to keep financial information secret. It is assertion all the way down.

Nothing shows that exclusive deals with secret terms are necessary for the NIH to carry out its public health responsibilities. Nothing shows, even, that exclusive deals are necessary for the NIH to carry out its public health responsibilities. All we have is the tautology that NIH chooses to do secret exclusive deals with companies that want the deals to remain secret, and that revealing secret terms of the deals would dissuade from doing business with the NIH those companies that will only consider secret exclusive deals.